Alliance holding on to two casinos

By Liz Benston (contact)

Thursday, Oct. 16, 2003 | 10:49 a.m.

Las Vegas-based slot machine maker Alliance Gaming Corp. has no immediate plans to sell its two casinos and isn't marketing them for sale, a company executive said Wednesday.

During a conference call to discuss the company's first fiscal quarter earnings, Alliance Gaming Chief Financial Officer Robert Saxton acknowledged that the casinos aren't core assets but said they remain "great products" that generate a significant amount of revenue at minimal expense.

Speculation that Alliance would sell off its Rainbow Casino in Vicksburg, Miss., and its Rail City Casino in Sparks, in Northern Nevada, arose after the company announced plans several months ago to sell off other non-core assets in order to increase profitability and focus on its primary slot making business.

Also Wednesday, Alliance reported a 4 percent decline in profit, primarily due to a $12.3 million charge for bank refinancing and early retirement of debt.

The charge consisted of a $5 million prepayment penalty for the redemption of company bonds, a $7 million writeoff of deferred financing costs and $300,000 in fees and expenses. The company recorded a $4.8 million tax benefit as a result of the charges, however.

Earnings were $6 million, or 12 cents per share, compared to $6.3 million, or 13 cents per share, for the same period a year ago, the company said.

Excluding the refinancing charge, earnings from continuing operations were 20 cents per share compared to 13 cents in the prior year's quarter.

That compares to analysts' average expectation of 18 cents per share.

The debt refinancing was the "last hurdle" in a series of moves aimed at improving performance, Alliance Chief Executive Robert Miodunksi said during the call.

The company in July announced it would sell off its United Coin Machine Co. slot route in Nevada as well as German gambling machine maker Bally Wulff and Louisiana slot route operator Video Services Inc.

The United Coin sale is still pending but is expected to close in spring 2004, Miodunski said.

The company's Bally Gaming and Systems slot making unit remains its primary growth driver. The fiscal first quarter ended Sept. 30 marked the unit's 13th consecutive quarter of growth over the same period a year ago.

Revenue rose 31 percent to $106.6 million, led by a 39 percent increase in revenue at Bally Gaming.

Cash flow rose 34 percent to $29.4 million, also led by a 42 percent increase at Bally.

Cash flow, typically defined as earnings before interest, taxes, depreciation and amortization, is a key indicator of casino performance.

Newer games including slots based on themes from the "Saturday Night Live" television show and "Cash For Life" games offering lifetime payouts are proving popular with customers, Miodunski said.

The company's two casinos reported a roughly 2 percent increase in revenue in the first quarter to $18.1 million, compared to the year ago period.

Casino cash flow rose about 7 percent to $6.2 million.

Rail City reported a 5 percent increase in revenue driven by a 5 percent increase in the average number of games and a slight increase in slot winnings. Revenue rose 1 percent at Rainbow Casino, the third consecutive quarter of revenue growth, the company said.